Consolidation at the end of the first year subsequent to date of acquisition—Equity method (purchase price...

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Consolidation at the end of the first year subsequent to date ofacquisition—Equity method (purchase price equals book value) Assumethat a parent company acquires its subsidiary on January 1, 2016,by exchanging 40,000 shares of its $1 par value Common Stock, witha market value on the acquisition date of $28 per share, for all ofthe outstanding voting shares of the acquiree. You have beencharged with preparing the consolidation of these two companies atthe end of the first year. On the acquisition date, all of thesubsidiary’s assets and liabilities had fair values equaling theirbook values. Following are financial statements of the parent andits subsidiary for the year ended December 31, 2016.

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ANSWER 1Consolidation entry of end year Here subsidiary account will be eliminated due to change in investment the equity income of parents and subsidiarys dividened as declared Description Debit Credit Equity income 240200 Dividends 40280 Equity investment 199920 Next the subsidiarysdate of acquistion stock holders equity to be eliminated because the parent See Answer

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